Tuesday, January 31, 2012

"Fiat:" an arbitrary decree or pronouncement, especially by a person or group of persons having absolute authority to enforce it: The king ruled by fiat - dictionary.com

The big topic of discussion in the cyberworld today was an interview with Jim Sinclair, who discussed an imminent ruling by ISDA - the board of OTC derivatives rules and enforcement - which would pronounce that any massive haircut in value taken by Greek bondholders would not constitute an event of default. This is not new information, as it was reported as far back as October that ISDA would make this declaration once the a Greek restructuring occurred. And it will occur despite the poker game going on, because if Greece defaults, then ISDA will have its fiat powers stripped by market forces when Greek sovereign paper goes offered without any bid (i.e. worthless). You can hear Sinclair's interview at http://www.jsmineset.com/

What bothered me was that Sinclair made ISDA sound like some dark, mysterious force out there that was largely hidden but imbued with supernatural powers. ISDA has been around forever. I used ISDA documents when we would engage in high yield bond swaps with funds like Harvard Investments in order to hide positions from the back office risk Nazis at year-end. It was de rigeur back then. It's rampant beyond control now.

The problem with ISDA is that it is governed by the same banks that stand to benefit the most from ISDA rule declarations: the big banks that have been declared by fiat as "too big to fail" by Team Bernanke/Obama (really, just Team Bernanke, but Obama reads the script off the teleprompter like a good circus animal).

So, in the Greek bond situation, what you have is a situation where big hedge funds and money market funds have loaded up the boat with short term Greek sovereign paper at high yields (and Italian/Spanish/Portuguese, etc), and bought OTC derivative credit default protection in the even of default. The way this works, if Greece is unable repay its bonds at a minimum of some small discount to face value, or if Greece defaults outright, the issuer of the credit derivative - the big bank in most cases - has to make the investor whole. On $10's of billions in Greek debt with credit protection issued, it can get expensive for the big banks.

To make matters even more interesting, there has been been outright speculation on Greek debt in which a hedge fund will bet on a Greek default by buying a fancy derivative from a big bank such that the hedge fund doesn't even have to own any bonds and it will still get paid. It's like buying a put option on a stock betting it will go down without actually owning the stock. Again, in the event that Greece has to "restructure" its debt at 30-50 cents on the dollar, or outright defaults, the big banks would have to cough up $10's of billions in "default insurance" payments.

But there's a way around this. It's called rule by fiat (see the above definition of "fiat"). Since the banks control the rules and procedures of ISDA, if they determine that a Greek restructuring which requires a 50-70% haircut on the debt held by investors is not really a "default" event, so be it. The Greek bond investor will be coerced into receiving a new bond that will be in the range of 30-50% of the face value of the original bond, thereby getting hammered on its investment, and the big bank who got paid a handsome premium to underwrite default insurance on that paper will get to keep the money it was paid and it will not have to make obligatory restorative payments to the investor. Isn't it good to be King in a completely fiat system?

The problem with the fiat currency and financial system is that eventually it turns into one giant Ponzi scheme. The politically/socially correct term for this would be "a fractional banking and financial system." It's a system based on "full faith and trust." When the trustworthiness of this system starts to fade, investors will start to move "fiat" money into hard asset currency - that is, gold and silver, the world's oldest and most trustworthy hard asset currency. It's happening now, only it's a lot more prevalent in the eastern hemisphere countries like China, Russia and India. In our own backyard, Venezuela demonstrated this movement by recalling nearly 100% of its sovereign gold that was being "safeguarded" by big banks in NY, London and Zurich: LINK Hugo Chavez, love him or hate him, is one smart hombre.

Gold and silver are on the cusp of another big explosive move higher. James Turk in his latest commentary on King World News said it best:

Regarding gold, I don’t think people realize that gold could explode from current levels. I think the potential for explosion is there and what you are going to see is not only silver on the move, but you will also see gold smash through the $2,000 level

Here's the LINK. If you don't understand why Turk makes these comments, re-read my commentary above. If you still don't understand why, so be it. Unfortunately, by the time the masses understand this, gold and silver will likely be too high in terms of fiat currency price for them to buy enough to matter. It is what it is...

Monday, January 30, 2012

I hope Romney gets the Republican nomination because it will create priceless entertainment watching the Democrats shred Romney's track record and background. If Gingrich gets the nod, he'll try to make policies and issues as the front and center topics of debate and slur and that would be intolerably boring...

Many of you by now have read excerpts from the Wall Journal article on MF Global and the disappearing $1.2 billion in customer funds. Here's a link to the partial article from the NY Post, which is the longest freebie posting: LINK

It really blows my mind that there's even any discussion about what happened to the customer funds because it should not matter. The customer's should be getting every penny of their money returned, whether it comes from the MF Global bankruptcy trust, the CME, the banks who received customer assets illegally as collateral and/or from the estates of MF Global's management. Seriously.

It's clear that JP Morgan was the biggest beneficiary of illegally hypothecated customer collateral. And it wasn't the only bank. These entities should be required to contribute to the full restoration of the missing customer funds. Same thing with the CME. And, quite frankly, upper management starting with Jon Corzine should be thoroughly investigated and, if illegal actions can be proved, they need to come up with restoration funds as well.

Where is the CFTC on this? How come Obama has not intervened and forced Attorney General Eric Holder to appoint an independent investigative team to get to the bottom of this? You're telling me that our Government can locate and freeze $10's of billions in Libyan and Iranian assets anywhere in the world but they can't come up with the electronic trail of $1.2 billion (or more) of missing customer funds from a regulated securities business that operates in Chicago, New York and London?

My friend and colleague "Jesse" wrote an insightful and compelling commentary which should be read by everyone: LINK The only observation I would add to Jesse's comments is that what we are witnessing here with MF Global is truly a case of racketeering. Normally racketeering is associated with mobsters and teamsters and longshoremen, etc. Organized crime. But what we have here is collusion among private banks, the court system and Government - otherwise known as fascism - in an effort to steal $1.2 billion from the rightful owners of that money. Racketeering.

Gary Gensler's name has been floated as a possible replacement for Tim Geithner. I guess it would be fitting for Obama to appoint someone who is a potential defendant in a RICO lawsuit - Gensler aided and abetted with MF Global's effort to hijack the customer assets before he "recused" himself from the situation - given that Obama appointed Geithner even after he was caught dodging taxes. Great country, huh?

Friday, January 27, 2012

Gold provided the best returns of all commodities in the past five years when adjusted for volatility, and Goldman Sachs Group Inc. says the rally will continue as options traders signal no change in the metal’s relatively low risk. LINK

I hate to beat a dead horse but I wanted to share the truth about Obama's policies with the people out there who still give him some benefit from doubt, especially as I'm sure his latest round of hot air and empty promises last Tuesday evening was probably well-received by the dopes who still have Hope. It turns out that ABC News ran a brief news report a while ago detailing how billions of publicly funded infrastructure projects are going to Chinese companies who are bringing over Chinese workers to do the work. Here's the LINK That story speaks for itself and I really can't believe Obama isn't being held more accountable for this. It certainly is a reality that is completely different from the promises on which he got elected...

Before we get to the Friday gold bug porn, I wanted to post a quick report on the new home sales number released earlier this week, mainly because the mainstream media headlines reported a small gain in new home sales from November to December. The Truth is that new home sales dropped 2.2% from December 2010 to December 2011, and that's the "seasonally adjusted" number. The actual number was 21,000 homes, the lowest since Jan 2011 and on par with the lowest monthly home sales on record. The actual number was actually below November's 22,000, so the Truth belies the headlines reported. In fact, annual sales in 2011 hit a new record low going all the way back to 1963, when the Government first started keeping records. The median and average price continues to plummet as well. Here's the LINK

One more piece of fraud. Earlier this week it was reported by a DC rag, The Hill, that another one of Obama's pet "green" energy "investments" filed for bankruptcy: LINK This one only cost Taxpayers around $118 million. Since this country's Government is currently on a run-rate of borrowing over $200 million per hour to fund operations, I guess Obama can brush this aside as only being 30 minutes worth of borrowing/printing. While this is getting zero mainstream media attention, I'd love to know how much of that $118 million was funnelled back to Obama's campaign fund...

Now for the good stuff. Below is a 1-yr daily chart of the price of gold. Those of you who are familiar with doing technical analysis on stock charts will recognize this particular chart as being nothing less than bull market full-on chart pornography. When gold breaks above $1800, we will really be off to the races. I think gold is going to make some moves to the upside that will shock most gold bears and surprise many bulls.

Thursday, January 26, 2012

The Fed stating that it will keep interest rates exceptionally low through 2014 is a symbolic act, like Warren Buffett stating that he would like to pay more taxes. - The King Report

The topic for this post came to me from an exchange of emails with a friend and colleague. After he had digested Obama's pathetic excuse for an election campaign speech the other night and had figured out all of the lies embedded in the rhetoric, he made the observation that "our problems in this country are far worse than even we can imagine." The "we" being the people who actually bother trying to figure out what's going on and have moved a lot of money into precious metals based on what they are seeing.

I responded with this:

"The fact that our country is being looted like it is - and as openly as it is by insiders who see even more than "we" do - is the clearest of any possible signal that things behind the scenes in this country are far worse than anyone outside the inner circle of looters can possibly know. It's getting beyond trying to paper it over and hide the truth for much longer and that's why there's the kind of money-grab going on by the big banks like the one being done at MF Global."

If you have even a shallow knowledge of history, you know that right before any empire collapses, there is a big wealth grab by anyone in a position to do so. It's no different than what is going on now in this country. And Obama is the perfect cover for what's going on because his speech-making abilities mesmerize the ignorant, stupid and desperate who support him and there's plenty of others out there who choose to believe him out of political and societal correctness. Sorry but that's the Truth.

And the Truth of the matter is that - in a way - we get to watch "the Fall of Rome." That's really what's going right now. It's kind of cool in a way, in the context of trying to "make lemonade out of lemons." Isn't it great? JP Morgan gets to keep $1.2 billion in funds that legally belong to customers of MF Global, who knows what Jon Corzine gets besides a free pass from jail and we get the lemons Obama threw at us the other night...

Wednesday, January 25, 2012

I will be throwing a big celebration party when he's gone: LINK The cover story is that Obama is not going to ask him to remain if TOTUS (Teleprompter Of The U.S. - zerohedge original) gets re-elected. But I'm sure the only reason is that Obama is trying to polish up his image with respect to amount of bending over he's done for Wall Street and the amount of Taxpayer money that Geithner has transferred like a good stage monkey to the too big to fail banks.

I can honestly say that Geithner has got to be one of the dumbest, most useless high-ranking public officials I have ever observed. I hated Bush's three Treasury Secretaries, but they all were of high intelligence. Geithner is nothing more the equivalent of mafia dumb goombah meathead who does whatever the big banks ask him to do. Seriously. I also truly believe that Geithner does not have one molecule of ethics in his body.

I'm sure he'll end up being a highly paid back office clerk for Goldman or JP Morgan (maybe a fluffer for Blankfein or Dimon) as his reward for giving the big banks $100's of billions.

But, is anyone on CNBC, Bloomberg or Fox Biz talking about the precious metals and miners today? I don't watch those channels so I don't know, but I would bet good money they are not. The HUI is up 6.8% right now. If the the Dow were up 6.8% it would be up 868 points from yesterday's close. I'm pretty sure that every single TV business reporter/anchor would be doing naked cartwheels, popping bottles of Dom and talking about the new economy.

Tuesday, January 24, 2012

“Whatever people bring to us, we’re ready to haul,” Krista York-Wooley, a spokeswoman for Burlington Northern, a unit of Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A), said in an interview. If Keystone XL “doesn’t happen, we’re here to haul.”

I had been trying to figure out why Obama nuked the pipeline proposed by Canada's TransCanada Corp that would have transported oil from oil sands in Canada to refineries in the Gulf of Mexico. The cover story was "environmental factors." Hmmm. I don't believe that I've ever in my life heard any politician or environmentalist anywhere give a rat's ass about the eco-system in Nebraska. It turns out that Warren Buffet's railroad will potentially get the business to haul that oil now.

But check this out: "Railroads too present environmental issues. Moving crude on trains produces more global warming gases than a pipeline, the State Department said." The real reason is because Buffet sleeps with Obama and the CEO of TransCanada does not. Here's the story LINK

Anyone besides me wondering why Obama has not taken on more of an activist role in going after the big banks who have been raking people over the coals with massive mortgage fraud and abuse/breach of foreclosure laws? It turns out that Obama's hand selected Attorney General, Eric Holder, and the head of the Justice Department's criminal division, Lanny Breuer, were partners at a big law that represented a "Who's Who" of the big banks like Wells Fargo, JP Morgan and Bank of America that are the main perpetrators of the massive mortgage fraud that has engulfed our country.

A lot of people don't even know who Eric Holder is. But he was an assistant AG in Clinton's Justice Dept and the guy who wrote the pardon letter for tax-evader Marc Rich and put in front of Clinton to sign as Clinton was walking out of the Oval Office for the final time. Eric Holder is about as corrupt and sleazy as they get. Here's the story from Reuters: LINK

Next time you read about wrist-slapping State settlements with mortgage banks, know that Obama and his Justice Department are behind this selling out of justice to the Too Big To Fail, Too Close To Obama To Prosecute big banks. Funny, because Warren Buffet is going to benefit from both the quoshing of the oil pipeline AND the failure of Eric Holder to do his job. Just curious, to everyone who voted for Obama and still support him: is this what you had in mind?

As you're watching Obama read his teleprompter tonight - delivering the words with Martin Luther King verve and vigor - also keep in mind that when he turns out the lights tonight he will be spooning with Warren Buffet and his Attorney General will be spooning with Jamie Dimon.

Monday, January 23, 2012

Reeeaaally? I've been noticing a lot of reports in the media - especially Wall Street cheerleader telecasts like CNBC and Bloomberg - that make the claim that America and Americans are de-leveraging. This particular spinmeister claim really bugs me because it's so easy to fact-check.

But it's not just the media. Zerohedge featured a report published by the consulting firm, McKinsey & Company, which makes the case that Americans are reducing their debt load. Those who went to top business schools know McKinsey as being the most sought after place to go if you want to work in a big, bureaucratic consulting firm. In this case the well-groomed MBA's who work for McKinsey have either intentionally misled their readers or can't do proper due diligence.

Let's take a look at the numbers - and therefore the truth. To do this all you have to do is go to the St. Louis Fed website. It has been obvious to me for over three years since the credit crisis blossomed and the housing bubble popped that on a combined Government + private sector basis, the U.S. has not de-leveraged. When I fact-checked the numbers, however, I was a bit surprised that the overall debt load in this country has actually increased since 2008. This, despite the billions that have been completely written off to zero by banks and credit card companies and bankruptcy courts.

But to look at McKinsey's claim, I checked the St. Louis Fed website and went to the "Debt Outstanding by Sector" link. There I find "Household Credit Market Debt Outstanding." This will include all debt extended to households, not just mortgage debt. On Jan 1, 2008 this number was $13.891 trillion LINK. As of July 1, 2011, the latest monthly number available, the amount outstanding was $13.21 trillion. So yes, there has been a slight reduction in household debt. But a significant portion of this slight debt reduction comes from banks transferring that household debt to the Fed and the Treasury. I can't readily quantify that number but I would bet good money that if you added that debt back the truth is that households really haven't de-leveraged but shifted the burden to future household generations.

The other main area of debt I like to look at, and this does not include total corporate debt, is financial sector debt. I like to look at this because, yes, the financial sector has reduced its debt load over the last three years. The debt load per the St. Louis Fed for the financial sector declined from $16.4 trillion in '08 to its current $13.7 trillion LINK. HOWEVER, everyone needs to keep in mind that a big portion of the amount reduced was transferred directly from the banks to the Treasury, courtesy of Obama and Tim Geithner (yes, Bush would have done the same thing and so would have McCain, et al). Please do not overlook this fact. In fact, it can probably be shown that a meaningful percentage of that debt transferred to the Government was debt related to Households. Therefore, it's not clear that the Household sector reduced its debt at all - it was just shifted to the Government. Rearranging the deck chairs on the Titanic does not change the outcome.

Finally, there's the Government. Over the same 3-year period, which transitioned Bush to Obama, the Government debt increased from $9.4 trillion to $14.8 trillion LINK. And right now we know it's around $15.3 trillion. FURTHERMORE, you have to include the roughly $7 trillion in Fannie Mae and Freddie Mac debt assumed by Obama/Geithner AND the GMAC debt these two idiots took on. I don't have a number handy the GMAC debt so I'll leave it out. THEREFORE, the total amount of direct Government debt outstanding is over $22 trillion (FNM/FRE debt is not included in the Financial Sector numbers, in case you were wondering). Again, my analysis does not include the nonfinancial corporate debt, which has increased quite a bit over the last three years: LINK

So, good people at McKinsey, where's the de-leveraging you are talking about? The numbers clearly show that, not only is our country NOT de-leveraging, the amount of total debt outstanding in the economy/system as a whole is starting to accelerate at an accelerating rate. I don't know about anyone else, but I find these numbers horrifying. The only thing more horrifying is that fact that these highly paid, well-trained dweebs at McKinsey do such crappy work. Then again, studies have shown that monkeys can become well-trained too...

Friday, January 20, 2012

Although the Bureau of Economic Analysis (BEA) reports that general business activity in the United States has recovered its pre-recession levels, no major independent economic series confirms that circumstance. Only the BEA’s overstated and heavily-politicized gross domestic product (GDP) measure makes that claim. December readings on real (inflation-adjusted) retail sales, production and housing all showed patterns of slowing growth or contractions, either month-to-month or year-to-year, with levels below pre-recession highs. - John Williams, Shadow Statistics

Silver is having a nice move higher today. Those of us who trade it on a daily basis have been of the view that the trading action is indicative of "coiling" action, in which sell-offs are bought greedily by the buyers who understand how cheap silver truly is. Today's action is a partial "uncoiling," as buyers are buying silver through resistance levels and short-sellers - like JP Morgan - are covering their shorts.

I have to say with utmost sincerity and experience as a trader that anyone shorting silver at these levels - and with the underlying fundamentals supporting substantially higher price levels - is either a complete trading novice or a complete idiot with a wish to lose a lot of money.

Of course, one of the technical factors that will drive silver higher for awhile is the money raised by Sprott to buy 10,000,000 ounces silver. Although they have already accounted for the silver on their NAV website, it will be interesting to see how long it takes for the silver to actually be delivered. Ted Butler has issued a comment in which he thinks that this time around delivery will made quickly, as Sprott and Embry were quite vocal about how long it took to get delivery last time around. Based on everything I see, hear, read and experience as a trader with regard to the silver market and readily available supply, I respectfully disagree with Mr. Butler.

The United States produces about 35 million ounces of silver per year. Already U.S. Mint silver eagle sales are running at a 60 million ounce run-rate. This will undoubtedly slow down, but I think it's safe to say that silver eagle investment demand alone will easily exceed the 40 million ounces sold in 2011 and thus the mining supply from this country in 2012. Add on to that the 10 million ounces Sprott is contracting to purchase and those two buying entities alone create a big supply deficit in this country. Of course, silver is mined globally and, based on reports out of London, the international demand for actual, delivered physical silver is enormous and waiting times for delivery are stretched.

There's one of other factor the I'm surprised has not been mentioned in silver market commentary. Hecla Mining, one of the largest pure silver miners in the world, had to shutter one of its mines in order to comply with safety regulations and clean out the access shaft. Although this is a temporary situation - Hecla managment has said that this will reduce its silver production from 9 million ounces in 2012 to 7 million ounces. So the mined output of silver in the U.S. will be around 33 million instead of 35 million ounces.

It would be a big mistake to assume that this 2 million ounces taken of the market this year will not affect the supply/demand situation, reducing supply and therefore adding to the demand forces that will force the price of silver higher this year. A lot higher...

Thursday, January 19, 2012

The minute this thing [Comex/LBMA/ETF paper fraud vs. actual physical demand] gets away and we start to have a real market and prices start to reflect real supply/demand, it will bring in a lot more demand at the same time supply is being diminished. This is why you’re going to have price moves of staggering dimensions. - John Embry, interview with King World News LINK

John Embry is one of the few precious metals market participants that is worth paying attention to - at least that I've found in my 10+ years of doing exclusively this sector. I couldn't agree more with the comments he makes in the link above. It IS going to get very nasty out there and the increasing degree and blatantness of the fraud going on in our system is the number one symptom of the true state of collapse going on in this country (and globally).

At any rate, I didn't want to spend time with bank earnings this quarter but the manipulation and bullshit being reported by the likes of Wells Fargo, Bank of America, etc. is farcical to the point of tears. As you are probably aware, Bank of America reported a $2 billion in net income, or 15 cents/share. This was basically in line with Street guesstimates. However, as always, it pays to comb through the 8-k/10-k in order to wipe away the lipstick and see what horrors are being covered up.

In Bank of America's case it is just too easy to strip away the lies and deceit and conclude that beneath the headlines BAC is a dying bank. To start with - and I normally ignore the fancy slides attached to these 8-ks that are fabricated for the Wall Street analysts who do no more than regurgitate the vomit served up by bank CEO's - if you scan through the slide show you'll find an interesting comment about loss reserves. It turns out in this case that BAC is part of a group of banks being sued over guarantees made to investors who invested in the fraudulent mortgages originated by these banks during the housing bubble. In here, BAC acknowledges that they are under-reserved for this by at least $5 billion. In other words, if Bank of America were honestly applying GAAP accrual accounting, they would have taken at $5 billion charge against earnings, thereby wiping out the $2 billion net income stated and they would have reported a $3 billion loss. You can read about the litigation going on HERE and keep in mind that the judicial system is starting to deliver much more severe punishment to these banks. So the $5 billion acknowledged may be too low. You can see the slide show in the 8-k I've linked below.

The $5 billion reporting lie is the easiest to spot. The other really easy one is the general "provision for credit losses" charge. In 2010 they took $28.4 billion credit loss provisions (meaning, they estimate the loss expected on all of the crappy loans and mortgages not already sold to Tim Geithner's Treasury and create a loss reserve - a balance sheet item - which results in a GAAP income charge in the current year). Just to make this quick and easy, BAC has $387 billion total in residential mortgages and home equity loans. We know from past analysis that BAC is carrying the first mortgages on their books at too high of a valuation. Since 1st liens are likely still substantially underwater, that means home equity loans are worthless, on average and in general. BAC has $125 billion in home equity paper. Even in the best case economic scenario, we can safely assume most of that will have to be eventually written down to zero. But let's be spiritual and give BAC the benefit of doubt and say that only 1/3 will be written off completely. That still leaves $42 billion in write-offs. How about they start taking $4 billion per year in charges for this (and we know it will be a lot bigger) and run it honestly through their income statement? Add that to the $3 billion loss as defined above and you know have $7 billion in losses.

And $7 billion in losses does not take into account many other items of interest that I simply do not have time to look into. But you get the idea when I say that ultimately, with the test of time, the earnings released today will be revealed as a complete absurdity and fraud. Here is BAC's 8-k if you want to do some work yourself or see what I saw and wrote about: LINK

To compound the fraud going on - briefly - many of you have probably heard about the lawsuit filed against JP Morgan yesterday that alleges that JP Morgan fabricated and created documentation that has been used to collect on foreclosed mortgages, ahead of all other creditors in bankruptcy proceedings. This fraud, if proved in court, will run into the billions and the potential damages awarded will be astronomical. Here's a great summary of the circus proceedings from Yves Smith's http://www.nakedcapitalism.com/: LINK As she points out, it is likely JPM may offer up a big wad to settle this without admitting guilt. I hope the plaintiff does not settle and forces JPM to admit to the fraud. This case would not have been filed if the plaintiff didn't have rock solid evidence. If the plaintiff holds ground with a lot of paper money being dangled to settle, this could reach all the way up and bite Jamie Dimon in the ass legally.

Folks, the degree of fraud and corruption gets worse by the day. And even more troubling is that fact that the Obama administration enables it, rather than prosecuting it and cleaning it up. Obama himself has been putting pressure on the judicial system to settle these cases and make them go away. For those of you voted for Obama, is this what you voted for?

Tuesday, January 17, 2012

U.S. debt and deficits are running over $1 trillion per annum and amount to over 700% of Federal revenue. And just last week, we learned that the monthly budget deficit climbed to $85.97 billion in December, from $78.13 billion in the same month a year earlier. The only relief from such debt will be a default on the part of the United States. A sovereign U.S. default would be pernicious for the dollar and massively bullish for gold. - Michael Pento, on King World News

I see Wells Fargo's earnings report was greeted by much fanfare by Bubblevision and the mass media slavishly followed by the hoi polloi. I was curious to see if I could figure out where Warren Buffet was fudging the truth about WFC's earnings, so I took a quick peek at the 8-K filed with the SEC this morning.

Let me qualify this by saying that I only looked in the obvious spots - of course ignoring the fancy marketing charts and spin data attached to the 8-K - to see where I could deflate WFC's inflated earnings report. I don't have time to go through WFC's numbers with a fine tooth comb, but just looking at the hot spots of GAAP manipulation will show you why WFC stock makes a better short than long.

First, versus 2010, WFC reduced its allowance for credit losses from $23.6 billion in 2010 to $19.6 billion in 2011. If they had just kept that number the same, WFC would have reported break-even results for 2011 - i.e. no net income.

Here's why I believe that a scrutinizing analyst should look at WFC's earnings report but use the same allowance for loan losses as in 2010: WFC actually increased the number of loans 90 days or more past due to $22 billion, from $18.5 billion in 2010. That's a 19% increase in non-paying loans (mostly mortgages). We also know that these banks are letting a significant portion of their delinquent mortgages "slide," without classifying them as delinquent or in default. So assume that WFC's number is actually larger than $22 billion. On that basis alone WFC's allowance for losses should have been closer to the $23 billion reported in 2010 than the $19 billion they reported this year

Furthermore, WFC has $37 billion in underwater "pick a pay" mortgages. These are the notorious "pay option ARM's" that allow the borrow to skip payments and that payment is then added on to the outstanding loan balance. These mortgages get bigger while the underlying housing collateral continues to shrink. Most of Well's pick a pays are in California and Florida. I think you can see that these mortgages will eventually be a big source of losses for WFC and WFC should therefore be reserving for losses associated with these mortgages at a faster rate, not a slower rate.

Even uglier, WFC as $106 billion in home equity loans. 35% of these are in Californian and Florida. When a 1st mortgage is, best case, just barely covered by the value of the underlying home, it means the home equity debt attached to that home is worth ZERO. If Warren and WFC were to be honest with the market and investors, the value of that home equity portfolio would be written down by at least 50%. That's $56 billion in losses. But since "new" GAAP and the "new FASB" allows these banks to hope and pray for a housing market miracle, lenders like WFC get to kick the can down the road and pretend that their home equity portfolio is really worth $106 billion. Anyone want to take Wells' side of that bet?

My point here is that Wells should be much more aggressive in recognizing allowances for credit losses. But since our ponzi system allows them to report b.s., it's b.s. we get when these banks reports earnings. Needless to say eventually Warren will call up his good buddy Barack Obama and see to it that the taxpayer gets the tab for the eventual mortgage bloodbath on WFC's balance sheet. But in the meantime, please understand that the earnings reported by Wells Fargo today were total bullshit.

And bear in mind, I only had time to look at obvious areas of GAAP manipulation. I'm sure if you combine today's filing with the 10-K and look at the off-balance mess in the footnotes, you will conclude the Wells probably should have reported an accounting loss.

Sunday, January 15, 2012

Just as Wall Street and the Government like to release bad news on 5 p.m. on Friday, when the markets have been closed for a few hours globally and everyone is focused on the weekend, I offer up my congratulations to the New England Patriots today, who thoroughly trounced the Broncos.

Having said that, I feel good about next season, as it looks like Tim Tebow has shown the ability over the course of the season to learn the pro-style passing game. What all of his critics fail to mention as they hurl unfounded insults at him is that, not only was he tossed in as the Bronco starter at halftime of the Bronco's 5th game, but because of the player strike he was unable to work on his game with his teammates during the off-season and he had very little practice time with the first team offense until preparations were being made for the team's 7th regular season game. The Broncos were 1-4 when Tebow took over. Denver has the 2nd youngest team in the league and it will be a good bet that they'll be back in the playoff picture next season...

I thought it would be interesting to point out Romney's biggest contributors so far, as sourced from zerohedge.com. Goldman Sachs is number #1, followed by Credit Suisse and Morgan Stanley rounding out the top 3. Bank of America is #7 and JP Morgan rounds out the top 10. Five of his top 10 contributors are Too Big To Fail Banks. Goldman is #1 contributor for both Romney and Obama. Goldman's actions remind me of the Rothschild family's actions in World War 2. The Rothschild's - Europe's extraordinarily wealthy Anglo-Jewish family - financed BOTH the Third Reich/Germans and the Allies (the good guys). Most people are unaware that they were bankers to Hitler.

It just goes to show that it doesn't matter what political party is in "power," the real power behind the politicians are the ones who throw the most money at them. Goldman doesn't care which party is in the White House as long as they have purchased control. Quite frankly, if Obama really truly stood for the principles on which he campaigned, he would not accept money from Wall Street. Of course, we know Romney has already revealed himself as a true whore early on. Democracy is dead and has been for quite some time...

Friday, January 13, 2012

Just got an e-mail from a still-wealthy friend in the house remodeling biz--he says vendors are crying for business and looking for jobs for their workmen--product can be bought cheaply - longtime market colleague

about housing. Despite the ebullience and bullishness surrounding the real estate/mortgage sector, the facts belie the spin. There is a lot of yield-starved hedge fund money flowing into distressed mortgage securities - there was an article on Bloomberg News today about how the (in)famous John Paulson is pouring money into and doubling down on his big mortgage/real estate bet. Judging by the ass-kicking his funds took in 2011, and observing the facts, I would continue to bet against him. I know someone in Denver who runs a commercial real estate investment firm who's been selling down his portfolio. He referred to the hedge fund pools of money buying them from him as "dumb money." Here's a nice warning from Moody's about jumbo mortgage defaults:

With home prices likely to slip further in 2012 the risk of jumbo mortgages, yet to refinance out of security pools, will be at a growing risk of strategic default, Moody's Investors Service said in a forecast Thursday.

Here's the article: LINK I personally know of a few people who are sitting in their McMansions waiting for the bank to pull the foreclosure trigger. The homes are hopelessly under water and housing values will continue to decline. I really don't know how John Paulson figured out to short the whole sector back in 2007/8. Maybe he's the hedge fund version Rain Man, and now he's gone off the deep end after getting buried in big long positions in BAC and Citi. Speaking of Citi...

Again, actual data and evidence shows that the real estate/housing market - and the mortgage paper financing them - continues to plummet: "Chase mortgage servicing expenses near $1 billion." This is up from expenses of only $59 million from the previous quarter. Here's the LINK In their Chase says they expect further declines in the housing market in 2012. Recall that there has been a big slowdown in actual foreclosures - not because people started paying their mortgages - from lawsuits and because banks slowed down foreclosures significantly to fabricate earnings and shore up regulatory capital. But losses from bad real estate loans will become a big theme in 2012 and these banks will have to start foreclosing on again the growing number of truthfully non-performing mortgages. And these articles are not something you'll see reported in the mainstream media. Instead you'll read about how big investors like Paulson are putting even more money into this crap...On to the fun...

Now, the Broncos are in the AFC Divisional Playoffs and face a heavily favored New England Patriots...well, Dave from Denver has your Tom Brady for ya right here:

GO BRONCOS

GOLD BLESS!

Two and half months ago the Broncos were in the suck for Luck sweepstakes - local Denver sports radio host, Mark Goodman

Thursday, January 12, 2012

I just noticed to day that two days ago Blackrock filed a 13G with the SEC, reporting a 10.4% ownership position in Agnico Eagle (AEM) stock. We won't know for sure if this is part of a larger wave of big institutional money flowing into the extraordinarily cheap mining stock sector, but just like hedge funds are "monkey see, monkey do," big institutions tend to run in herds...

"Mitt Romney is a conservative - just like George W. Bush is a real cowboy"

- Unknown source

I need to unload two huge sources of irritation today based on reports that I guarantee you will not be presented on Fox News, Fox Business, CNBC, Bloomberg, CNN etc.

I sourced these from an excellent source for housing market news, http://www.housingwire.com/. I mentioned the other day that FRE had implemented a program to enable those without a job to go for up to 12 months without making a mortgage payment. While the thought of this is nice, make no mistake, the expense of this will be funded by you, the Taxpayer. Now Fannie Mae has implemented the same program. And, all you need for the first six months is a phone call to your mortgage servicer. Here's the LINK

So now, if you lose your job, you can get jobless benefits for up to 2 1/2 years and if you have a Fannie or Freddie funded mortgage you can live in your home for free for 12 months. Maybe in Tim Tebow's spiritually ideal world of charity for anyone in need this is a great way to run society. But the expense of both the jobless claims and the housing welfare is something that our country and taxpayer base just can not afford. But just like the $278 million per hour that the Obama Government borrows every day, why not spend now to get votes and worry about paying for it later. This mortgage "forbearance" program is nothing more than another layer being added to the Government's welfare State. Given that this is a program being implemented without much in the way of a public announcement, you need to ask yourself if you would have voted for Obama knowing that this was coming...

The second item of agitation is the report that FICO, the most widely known assessor of credit scores, is out with a warning that it expects student loan and mortgage defaults to rise in 2012: LINK Given that we know that the evaluators of credit ratings are always way behind the curve when it comes to warning about debt payment problems and impending bankruptcy, I would suggest that student loan and mortgage defaults are already a lot higher in the "shadow" credit system. I define "shadow" credit system as the situation where banks and other lenders are giving borrowers several months beyond what the established accounting rules call for in declaring a borrow to be "in default." I know for a fact the banks are playing this game with mortgages and I have no reason to assume that student loan servicers are not doing the same thing:

Evidence is mounting that student loans could be the next trouble spot for lenders, said Dr. Andrew Jennings, chief analytics officer at FICO. A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults.

Quietly, the amount of student loans outstanding and guaranteed by the Taxpayers is now larger than the amount of credit card debt outstanding. The article linked puts the number at $750 billion, but I believe that the actual amount now per the latest consumer credit report is even larger - and its growing at an accelerating rate because many people are taking out student loans and going back to school when they drop out of the labor force because they can't find a job. Even worse, a large majority of students now graduate with a massive debt load and no way in hell of ever hoping to pay it off. A friend of mine who is a professor at Denver University Law School said that 90% of the class graduating last year did not have jobs.

So the public debt load continues to grow at an increasing rate on a daily basis and the ability to pay off this debt declines - at an increasing rate. Which brings up another point. The reported amount of Federal debt outstanding - and the amount used for purposes of calculating the debt limit test - is $15.2 trillion. However, this number is incorrect. There is $7 trillion in Fannie/Freddie debt guaranteed by the Government, plus roughly $2.5 trillion of "special" Treasury bonds in the Social Security trust plus, and most people are unaware of this, a few $100 billion in guaranteed GM and Chrysler loans (I don't know the exact number). So the next time you see a debt to GDP number of 100% for the U.S., know that the golden truth is that the real number is at least 160%.

Wednesday, January 11, 2012

"Insanity is doing the same thing over and over and expecting different results." - Ben Franklin, Albert Einstein, et al...

The debt spending by the Government - and even worse, the acceptance of it by Taxpaying Americans - is completely insane - by any definition of the word. But first I wanted to comment that yesterday I had speculated that the cost of Bernanke's housing market support proposals sent to Congress a week ago would cost Taxpayers in the range of $500 billion to one trillion dollars. Barclays is out today saying that Bernanke's Fed alone is likely to spend $500 - $750 billion buying mortgages. But Bernanke is also asking for Obama to chip in Taxpayer money. It remains to be seen just how much QE + deficit spending will total on this next round of economic "stimulus," aka big bank bailout confetti. Here's the report from Bloomberg this morning: LINK

I don't know about anyone else, but the situation surrounding the latest request by Obama to raise the debt ceiling had me a bit confused. I had thought that the deal reached in August ultimately raised the ceiling to $16.4 trillion. So I researched it a bit because the media is making it sound like what Obama is asking for is in addition to what was done in August. So here's how it works: In Feb 2010 the debt ceiling was set at $14.294 trillion. On August 2 it was raised to $14.694 trillion so that the Government didn't have to shut down until a new ceiling was reached. Then in September, a deal was reached that put the ceiling at $15.2 trillion but would ultimately take the debt ceiling up to $16.4 trillion, contingent on budget cuts. So right now the Treasury is at the $15.2 trillion limit and Obama has to get Congressional approval in order to utilize the final $1.2 trillion of capacity.

What's getting lost in all of this is that since August 2, the Government has borrowed $200 billion per month ($15.2 - $14.2 divided by 5 months). This is insane. The debt limit agreement in September was intended to take the Treasury thru 2013. Theoretically by then the Government was supposed to agree on massive budget cuts. I would bet my last silver eagle the budget cuts will never happen. In the meantime, the Government is borrowing at a record rate, spending at a record rate and tax revenues - the ultimate indicator of economic health - are coming in lower than was forecast when the fiscal 2012 budget was proposed.

Just think about this number for a minute: the Federal Government is borrowing at a rate of $200 billion per month right now. That's $278 million per hour in a 30 day calendar month. That is insanity. Based on that, the math from the original debt limit deal is tragically wrong and Obama and his happy Government spenders will run out of borrowing capacity by the end of June 2012. That's insane. California is a great microcosm and reflection of the fiscal insanity at the Federal level. Yesterday an hour and a half after the stock market closed, California announced that its current fiscal budget deficit is $2.5 billion wider than was forecast 6 months ago. I honestly don't know how California's Government stays open. Here's the LINK

The situation in California can easily be extrapolated to the national level. Despite the smoke and mirrors being used by the Government number crunchers and readily reported by the mainstream media, this country will not stop borrowing to spend until the rest of the world no longer accepts the dollar. You are insane if you don't think that can happen - just ask anyone who is familiar with the collapse of the German mark in 1923...

Ron Paul had a very impressive showing in New Hampshire. He finished 2nd with 23% of the votes. In 2008 I think he had something like 2% of the votes. Romney was expected to runaway with the NH primary anyway. Despite the "Live Free or Die" slogan on the NH license plate, it seems that voters in NH love insanely corrupt free-spending liberals masquerading as Massachusetts Republicans. That's insane too.

Gold and silver are putting on an impressive recovery from their post-MH Global manipulated collapse in December. Yesterday I mentioned that Jim Sinclair stated in an interview that "something is going on behind the scenes that is not yet evident" and that it was being reflected by quiet buying in the gold and silver markets. I would concur with this analysis and right now every sell-off intra-day in gold and silver is being bought.

If you don't think that the Government and the Fed are going to have to print a lot more money in order to feed the $278 million per hour borrowing - and to prop up the de facto insolvent banking system - you are crazy. If you don't start moving as much as can into gold and silver (and the extraordinarily undervalued mining stocks), you are insane.

Tuesday, January 10, 2012

What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular leveraging that will probably take 15 to 20 years to work through and we're just four years in. - Robert Prince, co-chief investment office, Bridgewater and Associates

I mentioned yesterday that the head of the NY Fed, Bill Dudley, was going around lobbying for fiscal and monetary "stimulus" for the housing market. Really in effect what this "stimulus" would end up being is a bailout for the Fed's member banks who still have massive exposure a housing market that gets worse by the day. Already Freddie Mac is letting deadbeat borrowers go a year without making mortgage payments: LINK People, the cost of this is coming from YOUR pocketbook.

The problem is actually pretty simple: too many homes were built during the last decade in response to the demand created for homes, which was enabled by the money printing and lending policies spear-headed by Alan Greenspan and later proliferated by Ben Bernanke. The political leaders signed off on this whole-heartedly because it meant re-election votes. But the housing bubbly frenzy created a huge illusion of demand that was never there. Even worse, it put millions of people into homes for which they over-payed and could not afford to keep.

So now we have a system that has substantially more homes in supply than there is rational economic demand. This economic imbalance will extend for at least a decade, probably longer. This housing stock was financed with debt, a large part of which remains on bank balance sheets and trillions of which are guaranteed by you, the Taxpayer, in the form of $7 trillion in agency debt issued by agencies that are now owned outright by the Government. The golden truth is that we are looking at the slow-motion collapse of the housing market in terms of true valuation and the massive defaulting on probably close 1/3 of the $7 trillion in Taxpayer funded agency debt and $100's of billions of private-label debt sitting on bank balance sheets or guaranteed by bank servicing companies. This is a serious disaster that was made worse by the monetary and fiscal programs enacted by Bernanke and Obama in 2009.

Now the same people who are responsible for creating the massive problem in the first place are now pushing hard to have "new" policies enacted that will help bailout the big banks who are sitting on $100's of billions of real estate and housing exposure, rendering them de facto insolvent even before figuring in other bad assets like foreign Government and bank exposure and off-balance-sheet OTC derivatives.

Six days ago Bernanke sent a letter to Chairman of the House Financial Services Committee in which he stated that the housing market was a roadblock to economic recovery and in which he offered proposals for "stimulating" the housing market. His primary solutions would entail mortgage principal reductions and Government subsidized refinancing programs. Of course Bernanke's fancy paper does not identify at all the cost of implementing his proposals. I would suggest that looking at the amount of delinquent and defaulted but not foreclosed debt at banks and the mortgage agencies would suggest that ultimate cost of Bernanke's proposals would fall somewhere between $500 billion and one trillion. We know from "trial balloons" that have been floated that the Fed has been looking at implementing a $500 billion mortgage purchase program. Now it's Obama's turn to throw hard taxpayer money into the bank bailout kitty.

Let's face the golden truth. The housing market is part of a larger overall debt accumulation problem in this country that will take decades to fix, just like it took 6 decades to create the problem. If the free market is allowed to do what it does, the problem will fix itself over time and the ultimate consequences and destruction to our system will ultimately be a lot less severe than if the Federal Reserve and Government take action to further push the problem into the future.

The strategy being floated by the policy makers will do nothing more than place a lot more of the burden of this problem on those left in the middle class who pay taxes, unfairly subsidize those who made poor borrowing decisions and, worst of all, bail out the banks and bankers who created the problem.

Jim Sinclair did an interview today in which he said, in reference to the move in gold and silver overnight, that "something is taking place [behind the scenes] that is not obvious." He referenced "quiet" buying going on in the metals. I have noticed a lot of volume coming into the extremely undervalued junior mining shares yesterday and today. But, I would suggest that part of what is taking place is that the savvy investors who understand the difference between gold and printed fiat currency are moving printed fiat currency into the metals ahead of what is going to be big year for QE and fiscal spending, deficits and Federal debt accumulation.

Monday, January 9, 2012

I'm having a bit of trouble focusing on something interesting and informative to write about today, not that I'm saying my posts in general are interesting and informative, as I'm still basking in the warmth of Denver's huge upset win yesterday over the Pittsburgh Steelers. Needless to say it was Tim Tebow's passing heroics that proved to be what beat the Steelers...keep the faith.

Having said that, I wanted to throw out here that while everyone is watching the day to day vicissitudes of the situation in Europe, the U.S. leaders are quietly putting together a gameplan for rolling out a massive fiscal and monetary stimulus program. "Fedwire," a Wall Street rag that puts out gossip about the goings on at the Fed reports that one of the newest voting members of the FOMC is going to push hard for more QE: Fedwire says keep an eye on Williams, who is handy with a printer - here's a the report from FT Alphaville, the handy blog of London's Financial Times: LINK

Second, head of the NY Fed, William Dudley, who also happens to be a former Goldman Sachs partner, has been promoting policy that calls for the Government - i.e. the Taxpayer - to pay for a massive subsidization of the housing industry. Not sure that you'll read about this in the U.S. mainstream media, but the Financial Times has written a detailed article: LINK (you may need to sign up for free login to access the entire article).

The fact of the matter is that the first round of massive bank bailouts - TARP - was a de facto massive Taxpayer bailout of the housing industry via the monetization of all of the fraudulent and bad loans made by the likes of Countrywide, Washington Mutual, Wachovia, Wells Fargo, JP Morgan, Citibank, Lehman, Merrill Lynch and Bank of America. Needless to say - and as predicted by this blog and others - the first few trillion served no purpose other than to fund the continued issuance of huge Wall Street bonuses. So now Wall Street, led by Bill Dudley, is back for more. I would bet my last gold eagle that sometime before this summer we will see both Obama-sponsored legislation that transfers several billion from the Taxpayers to the banks and a massive program by the Fed to buy mortgage paper from the Too Big To Fail Banks. This program, like the previous bad asset purchase program by the Fed, will be back-stopped by the Treasury. After-all, Tim Geithner is of course Wall Street's (and Bill Dudley's) official fluffer.

You can look up the definition of "fluffer" HERE - Definition of Fluffer I was actually surprised that Tim Geithner's picture was not part of the definition. But keep the faith, Dick Le Beau and everyone else, that's why we play the game and one day Geithner's picture will be the poster definition of "fluffer"...

Friday, January 6, 2012

Thursday, January 5, 2012

Of course, there are many. But first I had to get this off my chest, after reading the report that Jon Corzine and his wife were at some party in Paris shortly before MF Global collapsed and they announced that they were looking for a country French chateau to purchase. Perhaps the bankruptcy trustee, who's law firm counts JP Morgan - the primary non-customer creditor to the bankruptcy - should take a look at all cash flows that flowed from MF Global to Jon Corzine. It's a given that will never happen. But it occurred to me that one of the primary co-conspirators in this whole situation is CFTC Chairman Gary Gensler. In my book he is a total failure as a Government regulator and enforcer of laws. He is an employee of the public and should be fired. As a human being he is a loser. Quite frankly, in my book Gary Gensler's status as a human being is between whale shit and the ocean floor. And I extend this to AG Eric Holder for not initiating an independent investigation into this whole mess and to Obama for not forcing Holder to do so and for not removing Gensler from his position. I guess that in and of itself is a very ominous sign for our system and way of life.

As for an ominous economic sign - one which points toward even higher Government spending deficits and debt issuance - this was the headline on the front page of today's Denver Post: Medicaid rolls in Colorado at "all-time historical high" in November. This is not a good sign for the country as a whole because Denver has one of the stronger regional economies, lower unemployment rates and an economy that is not dependent on heavy manufacturing. When something emerges as a demographic trend in Denver, it usually precedes the same trend countrywide:

We've had a mushrooming of clients," Sue Birch, director of the state Department of Health Care Policy and Financing...There are just so many people who have lost their jobs — even those in my family who had really good jobs," said Dolores Rodriguez, while waiting for assistance at Denver's Westside Family Health Center

The Government is going to have to either cut back on other big areas of spending to maintain funding of entitlement programs like Medicaid and the perpetualized jobless benefits or it's going to have to resolve to create even larger deficits and raise the soon to be reached debt ceiling limit even sooner than we pessimists expected. Any way you look at it, it's an ominous sign and it creates even more fuel for the next the leg higher in the precious metals.

One other ominous sign I wanted to point out. And this is a statistic that is generated by Mastercard, not by the Government and industry association Phd data manipulators (hint: the ADP payroll number released today was total bullshit). It turns out that gasoline consumption during the last week of 2011 sank to its lowest level on record - at least the records kept by Mastercard. Here's the story as reported by zerohedge: LINK I can't think of a better economic health indicator than energy consumption - either electric power consumption or fuel sales. Speaking of electric power consumption, that has taken a nose-dive this year as well. You can see the graphs in this excellent commentary by Mark Lundeen: LINK

I wanted to finish today by re-emphasizing a point that I've been trying to hammer home for quite some time. I was discussing the markets with a friend, who commented that "all eyes are on Europe." My response was, "yes, all eyes are being deflected by Europe when they should in reality be scrutinizing the the ongoing collapse being hidden by the Government's Orwellian fog in this country." Got gold?

Wednesday, January 4, 2012

This is a crime on the same level as that of Bernie Madoff, only it involves an ex-Senator/Governor, the two most prestigious Wall Street investment banks, the CME, the CFTC, politicians, judges and even the Obama Administration. That this crime is going unprosecuted and the main perpetrator, Jon Corzine, is not waiting his justice in jail, is the latest, largest and most obvious signal that the United States as it was created and has existed is in full-scale collapse - Dave in Denver on MF Global

On that cheery thought, Happy New Year!

By now most of you have read the story about how MF Global sold assets to Goldman Sachs and JP Morgan "cleared" the trades right before MF Global filed. JP Morgan refuses to give up the funds that it is holding from these trades. Please keep in mind that the bankruptcy trustee could force JP Morgan to relinquish these funds but is not. Coincidentally (wink wink) JP Morgan happens to be a significant client of the bankruptcy trustee's law firm. Let's see: Jon Corzine was the CEO of Goldman Sachs and his number one lieutenant was Gary Gensler, who happens to be the chairman of the CFTC, the regulatory body that oversees firms like MF Global. Jon Corzine also happens to have been Vice President Biden's financial adviser and has spent plenty of time with Obama in the Oval office. See where this is going? This is grand scale theft in the billions and it is being enabled by those who were entrusted to enforce the laws and prevent this from happening, all the way up the President.

In other words, the United States is now a full-scale banana republic and we are watching the full-scale historic collapse of an Empire. From an intellectual standpoint, I find this thoroughly engaging and fascinating to observe. Fortunately I have come to the conclusion that there is nothing that can done about it so I've decided to look at it with a healthy dose of humor - the type of humor that is derived from the appreciation of the absurd. Try to enjoy your life as much as possible and don't let the full-scale theft and corruption going on agitate you. There's nothing you can do about it and Obama has made it crystal clear that not only is he not going to try and CHANGE it, he's actually become part of it. Period.

*************

Still wanna believe the garbage that Obama, Geithner, Bernanke and Wall Street are preaching about an "economic recovery?" To begin with, I'm sure many of you have already seen the articles published that detail how retail sales from Black Friday on through the end of the year were not nearly as strong as the hypesters were projecting and reporting. Even more disturbing, it now looks like a lot of the buying was nothing more than "retail therapy" and it now appears as if there will be a record number of returns. I thought I had saved an article link but I guess not. You can google the topic to see for yourself.

But this is even MORE interesting and it comes from a grass-roots source. An acquaintance of mine works for the IRS and sent me this email the other day:

I wanted to tell you a little information concerning taxes that is not on anyone's radar (sort of like a stealth aircraft of information). Since about late 2008 early 2009, the requests for payment plans to the IRS has tripled. People out there just don't have the money to pay their taxes in full, so they need a payment plan to keep IRS at bay. Even with a payment plan in place, the interest on taxes due keep adding up and the penalties for not paying on time and not paying in full keep adding up, keeping taxpayers in debt to Uncle Sam, meaning they have less disposable income to spend and invest meaning less money for the economy to grow. I have seen the requests for payment plans to the IRS triple with my own eyes...

So there you have it. The economy is bad, it's getting worse and the Government will have no choice but to print a lot more money. Like trillions. Got gold?

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.